Exchange rate uncertainty and deviations from Purchasing Power Parity: Evidence from the G7 area

Michael Arghyrou (), Andros Gregoriou () and Panayiotis M. Pourpourides ()

No E2009/23, Cardiff Economics Working Papers from Cardiff University, Cardiff Business School, Economics Section

Abstract: Arghyrou, Gregoriou and Pourpourides (2009) argue that exchange rate uncertainty causes deviations from the law of one price. We test this hypothesis on aggregate data from the G7-area. We find that exchange rate uncertainty explains to a significant degree deviations from Purchasing Power Parity.

Keywords: Purchasing power parity; exchange rate uncertainty (search for similar items in EconPapers)
JEL-codes: F31 F41 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba and nep-opm
Date: 2009-11
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Persistent link: http://EconPapers.repec.org/RePEc:cdf:wpaper:2009/23

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